Karl Dillinger versus Dennis Kneale (CNBC) Recession proof.

Erg grappig waar een blogje ruzie aan het maken is met CNBC

In verschillende media is er een uitspraak gemaakt dat de recessie over was. Waaronder ook CNBC.
Karl Dillinger (van MarketTicker) is de strijd aangegaan en heeft tegengas gegeven. En is nu een strijd gaande tussen de reguliere media en de blogjes.

Hier begon het mee.
To Dennis Kneale: You're An Idiot.

Since Dennis saw fit this evening on CNBC to "go after" bloggers who in turn had gone after him, yet he omitted The Market Ticker, I'll go ahead and put a full-on dredge out behind my stern and slow to 3kts.

And Dennis, if you would like me on your show, I'll be happy to appear. Phone is fine. And I'm not anonymous, nor do I want to be - CNBC already has has my full bio, my full name, and my CNBC-standard disclosure document back with a digital signature affixed. You can also "whois" this domain and get my full name and address. Good enough? Several employees of NBC Universal are on my forum and a CNBC producer has my direct email address - just ask around and I'm sure you can obtain it, and if you do email me I'll be happy to call you at your convenience.

OK, now on to the facts - your idiotic and utterly unsupportable "the recession is over" call.

There are two types of recessions, if you happen to know more about economics than you knew about options a year ago, when you were caught asking on the air "what's the VIX?"

The types of recessions are inventory driven recessions, the most common, and credit driven recessions.

The last material credit driven recession was in the 1930s. We called it the "The Great Depression."

Inventory-driven recessions are primarily about excessive industrial capacity for demand. That is, manufacturers and suppliers of services get too bullish about prospects, build too much capacity and inventory, and wind up engaging in a destructive price war in an attempt to "win". This drives down profits and ultimately forces the weaker firms out of business, ergo, recession - GDP and employment decline. Having cleansed itself of the excess, the economy recovers. The trigger for these recessions is often (but not always) an external shock such as the oil embargo in the 1970s or the collapse of the Internet fraud-and-circuses games in 2000.

The second sort of recession is a credit-driven recession. Excessive credit creation - that is, loans going too far toward "fog a mirror" qualifications (and in some cases, such as the most recent event, actually reaching "fog a mirror") drives one or more asset bubbles. These pop when effective interest rates in the economy reach an effective level of zero, usually because the amount of leverage available becomes for all intents and purposes infinite (Bear and Lehman at 30:1, Fannie/Freddie at 80:1, AIG at god-knows-what, and duped "home buyers" buying with zero down for a true infinite leverage ratio.) This excessive credit creation drives a speculative asset bidding war which in turn causes prices to go sky-high for one or more types of asset.

The latter sort of recession is triggered because the cost of borrowing money is never actually zero, even if people pretend that it might be. As a consequence the lenders begin to earn a negative spread and lose actual purchasing power. This is an unsustainable situation because cash flow cannot be fudged nor can anyone sustain a negative cash flow for very long; no matter how much you start with if you spend more than you make eventually you go broke.

Recessions cannot end until the conditions that caused the recession are removed from the economy. This is elementary logic and obvious to anyone with an IQ larger than their shoe size.

For an inventory recession growth returns when enough capacity is destroyed through layoffs and inventory selloffs to bring capacity and demand back into balance. Employers then hire new workers and the economy recovers.

For a credit recession, however, there is a much larger problem: The reason real interest rates went negative is that debt has a carrying cost and consumes free cash flow; so long as the debt taken on in the credit binge remains the cash flow impact also remains.

Default and bankruptcy clears excessive credit (debt) from the system - if it is allowed to occur. But if it is not, then the bad debt remains on the balance sheets somewhere and the cash flow impact remains in the economy. Employment remains weak, capital spending restart attempts falter as demand fails to return and credit quality continues to remain insufficient to support new credit demand.

The consumer is 70% of our economy, give or take a few points. The consumer's "savings rate" (which government blithely declares as income minus spending), which was in fact negative (that is, consumers were spending more than they made through taking on more and more debt), but is now solidly positive at 6.9%.

The impact of this (6.9% X 70%) is an immediate 4.83 decrease in real GDP. Fudge the numbers all you want (and government will), but this is the math, and the math is never, ever wrong.

The truly bad news however is that most of the time saving in fact turns into capital formation - that is, it becomes investment. But government doesn't differentiate between actual savings and debt repayment - their formula is simply "income less spending = savings rate."

You had one guest on this evening who "got it", but you wouldn't let him explain it, so I will.

Consumers are not saving, they are paying down debt in a furious attempt to avoid defaulting on nearly $1 trillion in outstanding credit card balances that have gone from 11% interest to 29.6% along with OptionARMs that are experiencing a tripling of payments while the home's value is underwater and precludes refinance, all while consumers are being laid off by the hundreds of thousands monthly.

We as a society and government are doing everything in our power to avoid the banks and others having to take their medicine - that is, to allow the excessive debt to be defaulted. We have in fact shifted more than $2 trillion dollars of actual bad debt onto the Treasury and Federal Reserve rather than allow the market to declare it defaulted and force those who hold too much of it into bankruptcy, and we continue this asinine and exactly backward program to this very day.

This is an utterly idiotic policy because the condition that led us into this recession - excessive debt - must be removed, not shifted around and hidden, before the recession can truly end.

Japan tried what we're doing in the 1990s and failed. The Nikkei never recovered its former highs, in fact, it never even got close. Japan's economy never managed to get materially out of deflation and is now back in it as a direct consequence of their refusal to force the bad debt into the open and default it.

We are going to suffer the precise same fate for the precise same reason unless our government and economic leaders stop hiding the bad paper and force it out into the open where it will default and be removed from the economy.

Your network has fawned all over Bernanke when in fact he is acting exactly backward compared to what must be done - he is hiding bad assets on his balance sheet, allowing banks to hide bad assets on theirs, and refusing to expose the liars, cheats and frauds (along with their phony "assets") so they will default and clear the system of bad debt. He is doing this because he is protecting those who wrote all that bad paper, mathematics be damned, and if it doesn't stop we will at best play Japan and at worst have a Depression far worse than the 1930s, as our systemic leverage ratios still, to this day, are higher than they ever were in the Great Depression!

This is not about what I believe Dennis, this is about mathematical facts. Real GDP has taken a 4.83% contraction already from consumers alone - now add into this the pass-through effects on manufacturing and service output from unemployment and the numbers are even worse. It matters not what the government cooks up - what matters is what people actually do.

Finally, on your so-called "Golden Cross"; for it to be valid the 200MA and 50MA must be rising. The 200MA is falling; ergo, it is a false signal. Go look at some charts; this indicator is no better than a coin toss if the second condition, which you conveniently omitted, is absent. Better yet, talk to a market technician that knows his butt from a hole in the ground. I do a nightly technical video available on my forum and pointed this out several days ago.

I will be happy to debate this at your leisure at any time live on the air Dennis, and will tattoo your "Recession Is Over" call on your forehead. In addition to CNBC I will issue my own challenge - let's do this on Podcast. I have a show on Blogtalk, and will schedule a separate show of duration of anywhere from 15 minutes to 1 hour (you choose the length of the beating you wish to endure of the topic) and we'll go at it. The rules are simple: No talking over one another, and nobody hits the MUTE button; you bring your best alleged facts, and I'll bring mine. You can also bet that this Ticker will be prominently featured when, not if, you're proved to be just as ignorant of economics as you were on options hedging strategies and the VIX, or if you attempt a stunt like you pulled on the blogger who DID agree to be interviewed.

I'll bet you won't take me up on this challenge for one simple reason: your claims are unsupportable and you know it.

The teleprompter will not save you.
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CNBC nam de uitdaging aan.
Klik op de video van de onderstaande link.

Kneale: You Asked For It....

So Dennis Kneale decides he's going to cite me this evening on his show, claiming that I make a "decent argument" but fail to present numbers.

Well Dennis, I don't think I should have to recite the last two+ years of numbers, nor the litany of new Fed Credit programs, nor the consumer credit numbers which were released today and which your network reported this afternoon, when you're the one claiming that "the recession is over" and argue against the credit recession position I put forward.

But since you didn't bother with these nasty things called "facts", I'll do it for you.



Here's the consumer credit numbers that your network talked about today when they were released (click for a full-size window):

Now I want you to pay particular attention to the current total leverage held by consumers - that is, the total amount of debt, excluding mortgages.

In 2004 consumers held $2.191 trillion. At the peak, they held $2.582 trillion. Today, less than three quarters later, they have cut back by an astounding $62 billion dollars in total, or a whole 2.36% - an absolutely inconsequential amount.

Consumers have de-leveraged? Uh, no.

In the meantime the claim is made that financial institutions have taken down leverage. Oh really?

Let's start with this (click for full screen)


That's total credit market instruments, all sectors, and it is still rising. In fact, it is rising fast - very fast! Currently at $52.9 trillion dollars, up from $50.7 1Q 2008, and up from $31.9 trillion in 2002.

The Bank of International Settlements (BIS) says that the total amount of outstanding derivatives has reached a nearly-incomprehensible $1.28 quadrillion dollars. Oh, and this does not include derivative positions related to the commodity markets. Further, the outstanding amount has increased at a double-digit percentage rate over the last 12 months.

European banks are still geared at 30, 40 even 50:1. Go look up the leverage ratios for Deutche Bank, among others. Make sure you're sitting down. Our own banks have refused to take their SIV and other off-balance-sheet garbage back onto their balance sheets, and thus are intentionally understating their leverage ratios. Fannie and Freddie are still geared at over 80:1, although under conservatorship.

Our banks have de-leveraged? Uh, no.

Now, The Fed. Its balance sheet has more than doubled and is now approaching $2 trillion dollars - a near-100% gain in the last 12 months.

The Fed has de-leveraged? Uh, no.

Our government is next up. Let's cite the NY Times:

Through April 30, the government has made commitments of about $12.2 trillion and spent $2.5 trillion.

quote:

Our total outstanding public debt is about $6 trillion, up by a full trillion in the last year, and we're on-plan to add $1.8 trillion to our public debt this fiscal year - that's a 30% increase Dennis.

Government has de-leveraged? Uh, no.

All these facts have been reported on your network Dennis. I shouldn't have to list any of them, as you should know all these facts - they're literally "in your face" every single day.

We are in a credit recession. We cannot get out of the credit recession until the conditions that led to it no longer exist. The conditions that led to it are too much debt and too much leverage, and yet the prescriptions of both the Bush and Obama administrations are to add even more debt and more leverage to the system, shifting bad debt around and stuffing it under the rug in an attempt to hide systemic insolvency, rather than force it into the open and demand that the excessive leverage and debt be either paid down or defaulted.

Consumers are in a mad dash to pay down debt rather than default where they are able, but as you can see they've only managed to get rid of $60 billion - that's the shift in the "savings rate" you're seeing. As I've noted consumers are not saving, they're paying down debt - but at this rate it will take five or more years before consumers alone are sufficiently de-levered, and that will leave all of the nearly $14 trillion dollars taken on in additional leverage by our government to prop up failed institutions outstanding.

No Dennis, the recession is not over, and until our government stops propping up the liars and thieves, preventing the bad debt from being defaulted and removed from the system, any relief from this economic malaise will be fleeting at best.

There's the numbers behind my argument Dennis - and the proof.

You're wrong.
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Met deze numbers zet Karl zijn credibility op het spel. Maar de numbers zijn wel ernstig en geeft een insight van wat de reguliere media niet wil laten zien. There is no uplift for the next couple of years there never will be.

ROFL..... KARL speaks.


WTF heeft hij op zijn hoofd.....(marmot of zo).
Forget it... dom is hij niet.

knip past beter in BBB.